Myanmar is becoming the new battle ground for Coca-Cola and Pepsi for share of the carbonated soft-drink market currently worth US$100 million a year.

With Coke and Pepsi back in the fray, Myanmar's soft drinks market is set to heat up with the approaching summer.

The hottest season of the year in Southeast Asia is approaching. The return of two giant global players - Coca-Cola and Pepsi - to the last business frontier versus existing local brands is expected to make Myanmar's soft-drinks market the hottest battleground in Asean.

After making its presence felt in Myanmar for about six decades, Coca-Cola pulled its products out of the market in 1988 following the military junta's crackdown on protesters and US sanctions. Likewise, Pepsi also left due to the investment ban and most of its employees moved to work with a famous local soft-drink company, Myanmar Golden Star, that produced Star Cola, which had a Pepsi-like taste.

With the comeback, Coca-Cola plans to invest about US$90 million to set up a factory to produce non-alcoholic beverages and purified drinking water. Pepsi will also bring with it 7-Up, Mirinda, Lays and Quaker Oats.

Their brands will then compete head to head with local brands like Star Cola, Blue Mountain, Crusher and many more.

Dr Sai Sam Htun, chairman of Loi Hein Group of companies, one of Myanmar's leading beverage manufacturers and distributors, regards the arrival of the two multinational brands as a "big storm" in the carbonated soft-drink market for the company. Competing in advertisement spending alone is seen as difficult. The company has come up with several strategies to fight this fierce competition.

"One option is to partner with somebody. The second thing is we come up with an advertising budget of about $3 million for a lucky-draw campaign and other money for promotion, advertisement activities and marketing," he said.

The competition will heat up due to the small size of the soft-drink market, worth only $100 million a year against $1.2 billion in Thailand. Loi Hein Group now controls about 30 per cent of that, with brands like Blue Mountain, Green Spot, Fantasy, and Lemon Sparkling. It also produces energy drinks and wine. Other local manufacturers are Myanmar Golden Star, Pinya Manufacturing, and Happy Soft Drink company.

Coca-Cola and Pepsi spent a large amount of money on promotion and advertisements. Billboards, big and small, of these two were put up everywhere in Yangon.

Loi Hein's focus is the rural market, which accounts for 70 per cent of the population. "We get the money from the people so we go by the people, for the people, and actually that's why we go for lucky draw and other social responsibility activities," he said.

Another strategy is to find alterna?tives such as green tea drink or other options. It is believed that the Myanmar market for soft drinks is gradually changing for two main reasons - international players and the rise of the lower-income class.

Soe Moe Thu, managing director of Premium Distribution and director of City Mart Holdings, one of the major distributors in the country, revealed that people in big cities of Myanmar have higher purchasing power than before. "Their spending power can be quite high at around $20-$80/basket/shopping trip. That class is growing rapidly. We do see big potential. I think it can double in the next three years with the development we are seeing now," he said.

Moreover, consumers are not limited to local people only but also foreign visitors who flocked to the country. In 2012, more than 550,000 people landed at Yangon International Airport which is the main airport of Myanmar. It was 54 per cent higher compared to the previous year.

Supporting the huge growth is also the development of the retail sector.

Frederic Etienbled, CEO of HyperTrade Consulting, said Myanmar's retail sector is a very dynamic and soaring market. The sector, estimated to be worth $13 billion to $15 billion, is predominantly traditional with about 150,000 stores around the country. Modern trade now controls only 10 per cent of that.

Foreign beverage-makers are now looking for ways to enter the last frontier. One option for them is to appoint a distributor in Myanmar, to take care of import permits, shipment and distribution. Some are opting to establish offices and handle imports. Some of them are expected to set up manufacturing plants in the country. For all products, they must win approval from the local Food and Drug Administration.

Even though Myanmar is a land of opportunity and the soft-drink market is very vibrant, from the experience of one of the leading carbonated soft-drink manufacturers in Myanmar, doing business in Myanmar especially in beverage is quite challenging.

"The most difficult thing we are facing is the financial crisis. The lack of investment is a major problem. I have to pay people a lot of money and yet my cash flow is out," said Dr Sai Sam Htun, a medical practitioner-turned-entrepreneur. This problem is mostly due to under-regulated finance and banking system. The system is currently being reformed. Investors may need to follow every update of Myanmar's law, rules and regulations that can be found in local newspapers.

He added that another major problem is the changing of the minister of Industry. It resulted in a new set of regulations being implemented. Loi Hein itself has had to adjust to many changes during the past 18 years.